Amazon, Sears both support federal sales tax collection plan

I’ve written quite a bit about so-called “Amazon laws”, which basically seek to compel retailers to collect sales tax for a state when they previously did not have to do that.

There have been a hodge-podge of approaches by the states…and different reactions from Amazon.

I’ve suggested before that it was going to be settled at the federal level: by the Supreme Court (because it involves interstate commerce, it is a constitutional issue) or by the Congress.

Now, Senator Dick Durbin and Representatives Dick Conyers and Robert Welch (along with other co-sponsors) have introduced a bill to standardize sales tax collection (but not rates) at the federal level.

One of the big things that affects that is who supports a bill and who opposes it. Organizations (including corporations) may spend a lot of money on one side or the other…even run television advertising.

That makes sense: they may be seriously impacted by something becoming a law.

The two corporate sides in this case are large internet retailers (Amazon, Overstock, eBay), and large brick-and-mortar retailers (Wal-Mart, Target, Sears).

The idea of federal sales tax collection standardization is presented as protecting small businesses…this one is called the Main Street Fairness Act. Many bills have names which have more to do with stirring up emotions than describing what they do. In this case, one could argue about what is fair (internet retailers don’t collect sales tax on certain sales…but brick-and-mortar stores don’t have to deal with shipping and handling), but you also aren’t going to find those big retailers on Main Street…unless it goes five miles out of town and has pastures along the side. ;)

So, the first interesting thing about this bill is that both Amazon and Sears support it.

eBay is reportedly opposing the bill. eBay certainly has a lot of “small businesses” (many wouldn’t even qualify as a business to most people), and sellers who aren’t used to collecting sales tax. Amazon certainly knows how to collect sales tax…I think more than half of their revenue comes from places where they collect sales tax. You can see why there might be a split there.

My guess is that the bill will have a lot of corporate support.

However, it is worth noting that all of the sponsors and co-sponsors are, I believe, Democrats. That might suggest some opposition from within the House and Senate.

What does it actually say?

Well, that should be, “What do they actually say?” The House of Representatives and the Senate will have different bills, then they’d have to reconcile them…you probably know how that back and forth can go.

4 SEC. 3. FINDINGS. 5 Congress makes the following findings: 6 (1) States should be encouraged to simplify 7 their sales and use tax systems. 8 (2) As a matter of economic policy and basic 9 fairness, similar sales transactions should be treated 10 equally, without regard to the manner in which sales 11 are transacted, whether in person, through the mail, 12 over the telephone, on the Internet, or by other 13 means. 14 (3) Congress may facilitate such equal taxation 15 consistent with the United States Supreme Court’s 16 decision in Quill Corp. v. North Dakota. 17 (4) States that voluntarily and adequately sim18 plify their tax systems should be authorized to cor19 rect the present inequities in taxation through re20 quiring sellers to collect taxes on sales of goods or 21 services delivered in-state, without regard to the lo22 cation of the seller. VerDate Mar 15 2010 04:21 Jul 30, 2011 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2701.IH H2701 smartinez on DSK6TPTVN1PROD with BILLS 3 •HR 2701 IH 1 (5) The States have experience, expertise, and 2 a vital interest in the collection of sales and use 3 taxes, and thus should take the lead in developing 4 and implementing sales and use tax collection sys5 tems that are fair, efficient, and non-discriminatory 6 in their application and that will simplify the process 7 for both sellers and buyers. 8 (6) Online consumer privacy is of paramount 9 importance to the growth of electronic commerce 10 and must be protected.

At this point, they are not substantially different. I’ve skimmed both, but I’m not sure they are exactly the same…they’ll both change going forward anyway.

What impact will these have on you, as a Kindleer?

Let’s assume they pass pretty much as proposed. States have to simplify their sales taxes, and wherever you buy something (in a store, online), sales tax is collected at the time of sale.

Are you going to owe more sales tax?

Nope…unless for some reason states raise sales tax rates in response, but they are going to get so much more money this way I don’t think that’s likely.

Are you going to pay more sales tax?

I would guess that’s true for the vast majority of internet shoppers.

When we pay our annual state taxes, we calculate what we purchased from internet retailers, which ones haven’t taxed us already, add up the appropriate sales, and then pay a lump sum…and it can be pretty high.

When I say “appropriate sales”, that doesn’t include Kindle books…my state, California, doesn’t tax e-books delivered electronically. We go ahead and pay taxes on everything else: it’s just too complicated to figure out which items should be taxed and which shouldn’t.

I’m sure that means we tend to overpay. Philosophically, we’d rather accidentally pay too much than pay too little. My understanding is that the majority of people pay too much on their taxes…but that may be due mostly to not finding all the deductions.

This legislation would be a big advantage for us: we’d be paying those sales/use taxes throughout the year, rather than all at once, and I wouldn’t have to do the calculations myself.

It could lead to more standardization of sales tax rates, but I think that’s not as likely. We pay close to nine percent, quite a few other states pay around five percent. That doesn’t mean I want to see their taxes go up, though.

There are a lot of possible ramifications here: would people who are tax collectors for the states lose jobs? Would states start taxing more things, since it would be easier to collect the tax? Would having Amazon and other e-tailers collect taxes at the time of sale hurt their marketshare? Would this save your Mom & Pop bookstore (if any)? Does this have any chance of becoming legislation…before the Presidential election? After? Feel free to let me know.

Oh, and I want to thank regular reader and commenter Edward Boyhan for alerting me to this

I just have to think that this has very little chance of becoming law. I can understand that Amazon would want it to pass, because it might level the playing field with ebay and other avenues for small vendors. But this is one of those rare areas of the law that affect the majority of ordinary people in this country. The vast majority do not pay sales tax on online purchases or other mail order, unless the seller collects it as part of the transaction. So, any legislature voting on this has to realize that it has the potential to upset the people that they depend on to reelect them.

It might make sense for fairness’s sake, but voters don’t want to give up a free lunch.

The tricky part about that is that money has such an impact on elections, especially for television advertising. A politician could support this bill, get a lot of that now basically unlimited corporate support, and then pass it mid-term. Their rebuttal commercials are going to say, “Those big out-of-state internet guys are trying to tell you the Main Street Fairness Act will raise your taxes: it won’t. Nobody will owe a single penny more in sales tax. All it will mean is that those guys will have to do the same thing the stores in our neighborhoods already do. They are trying to frighten you….but it sounds like they’re the ones that are scared. The Main Street Fairness Act: a level playing field means we see who the real winners are.”

I just made that up, but I think you’ll see a lot of Mr. Hooper’s Store kind of imagery.

I expect the hard part will be getting states to simplify their sales taxes enough to not run afoul of the Quill decision. Here in IL, each county and some cities have their own rates. In addition, some categories (groceries and medicine) are taxed at a lower rate. Simplifying all that down to one rate for Internet vendors to charge hasn’t happened in several years of Congress encouraging it to do so, leaving me to wonder what’s different this time?

I thought an interesting piece of the bill was that, if the states don’t fit the requirements, they don’t get this money, basically. That’s going to put a lot of pressure on them. Also, the bill allows them to keep things exempt that were exempt before. Starting on line 20, the House bill says:

“A Member
21 State may enact product-based exemptions without
22 restriction if the Agreement does not have a defini-
23 tion for the product or for a term that includes the
24 product.”

I’d have to go back over it, but I don’t think it requires a single rate for the state.

As I’ve expressed before, I support California’s and other states’ attempts to tax Internet sales, and I support this Federal attempt to straighten things out…clearly the responsibility lies with the Feds. This section says it all:

8 (2) As a matter of economic policy and basic
9 fairness, similar sales transactions should be treated
10 equally, without regard to the manner in which sales
11 are transacted, whether in person, through the mail,
12 over the telephone, on the Internet, or by other
13 means.

Exactly so.

As far as the states simplifying their sales taxes, I don’t see why it’s necessary, but whatever.

I agree…the responsibility lies with the Federal government, because it is interstate commerce, in my opinion. It’s very different to me when the states are trying to extend their jurisdictional powers.

As to simplifying, the Quill decision (which established the “nexus” idea of requiring a physical presence in a state) opinion referenced the National Bella Hess decision (although it said that computers had made this less of an issue) which includes this:

“The many variations in rates of tax,13 in allowable exemptions, and in administrative and record-keeping requirements14 could entangle National’s inter- [386 U.S. 753, 760] state business in a virtual welter of complicated obligations to local jurisdictions with no legitimate claim to impose ‘a fair share of the cost of the local government.’

The very purpose of the Commerce Clause was to ensure a national economy free from such unjustifiable local entanglements. Under the Constitution, this is a domain where Congress alone has the power of regulation and control.”

In a recent study %95 of consumers polled stated that there buying decision would remain unaffected should online retailers collect sales tax. Most already expect to charged sales tax since it is legally due.

I believe Amazon’s sales will be just fine, perhaps a little better. Just prior to Senator Durbin introducing the Main Street Fairness Act, Amazon started receiving negative backlash. Sales tax funds the many public services including but limited to education, fire, police, libraries, infrastructure, medical care and so much more. Many are beginning to realize that companies such as Amazon, and Ebay have been promoting business segregation maintaining their tax free selling status over smaller merchants and brick and mortar merchants, and there for failing to collect and remit sales taxes legally due local municipalities. As Internet sales have increased exponentially over the past 10 years so have state’s budget shortfalls. As I pointed out many consumers are unaffected as they already expect to be charged sales tax knowing the funds keep down new fees and taxes while supporting the public services that maintain their property values and standard of living. By supporting sales tax collection Amazon is being and ethical and patriotic business. I believe they will continue to dominate the online market while companies such as Ebay who are more than capable of calculating, collecting and remitting sales tax legally due continue to support the act of tax evasion.

What many do not realize is that globally beyond US borders there is no option for online merchants to engage in business with out collecting and remitting tax due in many of the countries online merchants do business in. Amazon, Ebay and other merchants have systems in place to seamlessly handle tax collection for jurisdictions and thousands of situations more complicated than in the USA.

In the USA there are companies whose demand began from the Streamline Sales and use Tax Agreement which has been under development since MArch 2000. 44 States have signed on to simplify their tax definitions and filing requirements making sales tax collection simpler. Currently 24 states are full members making tax collection and remittance automate and simple in those states. The Streamline Sales and Use Tax Governing board organized a set of standards resulting from this effort outlining demand for Certified Service Providers (CSPs). Companies formed to meet the new demand going through a stringent set testing and certification procedures to become Certified Service Providers. There are several CSPs available merchants that can handle all aspect of sales tax calculation, collection, remittance and audit procedures. Some CSPs charge for their services and there is one that is FREE to any business.

I am a small business owner whom as enabled my business to calculate, collect and remit sales tax. I chose to utilize the free CSPs services realizing that I would save money eliminating the need to further frustrate my accountant as well as save myself time. What once took me hours to remit to just one state is now accomplished seamlessly and efficiently saving me time and money.

Many businesses will benefit tremendously as I have. I am certain that Amazon now realizes they are spending millions on state nexus lawsuits. Federal legislation will eliminate harmful nexus lawsuits saving amazon time and money.

Federal legislation enables states rights to collect sales tax legally due. With the passage of the Main Street Fairness Act states will not be able to begin collecting unless they streamline their procedures as outlines by the Streamline Sales and Use Tax Agreement.

My business has now become more efficient through voluntarily engaging in the collection and remittance of sales tax legally due. Every year I wish my tax return would become simpler. With the passage of the Main Street Fairness Act it will. No longer will I be saddled with the burden of tracking uncollected sales tax and remitting it on my individual return. My customers don’t have to be burdened any more either. Most importantly states and local communities will receive tax legally due.

Amazon should not be the only internet retailer required to collect and remit sales tax legally due. Technology available freely on the internet is more than capable of handling sales tax calculation and remittance. Sorry everyone, the “too burdensome” argument carried merit in 1967 and in 1992 (when SCOTUS last ruled on this matter), but in the era of modern computing where Ebay maintains a dominant position, multijurisdictional sales tax calculation and remittance is easily accomplished.

So what is the real reason Ebay chooses to evade supporting your schools, hospitals, infrastructure, libraries, parks and so much more? Amazon for some reason has been made the poster child of this issue, but I believe Ebay has played a large role in that. I believe the time has come for consumers to become ethical supporting companies such as Amazon who choose act responsibly and fairly. Yes, state nexus legislation made them pull out of states, but why should Amazon be the only company forced to comply?

Amazon has been supporting comprehensive federal policy on sales tax collection for some time. I think they tend to be the target more than eBay, because eBay is seen as individuals selling whereas Amazon is seen as more similar to a brick-and-mortar store. Of course, many companies use eBay to sell, but that’s not the mythology.

I think we see this a bit differently. The problem is consumers that don’t pay their taxes, and states that fail to enforce (or often even to educate the public about) those policies.

It’s important to me that it isn’t up to the states to enforce interstate commerce rules, it’s up to the Congress. That’s a significant constitutional issue. That’s why the Congress (and/or the Supreme Court) is where this should be settled, not individual states redefining existing case law (particularly as interpreted by the Quill decision).

I think a Federal decision that effectively says the sale takes place where the purchaser is would make a big difference.

Amazon is also not the only company involved, of course…that’s why both eBay and Overstock have been vocal about it. However, the slang term “Amazon law” has put the focus on that e-tailer.

[…] As I’ve written about before, Amazon supports a federal law, the “Main Street Fairness Act”. It would result in internet retailers collecting sales tax for states in which they make sales. It’s not an additional federal sales tax: you wouldn’t owe more taxes, but unless you pay them on your annual state taxes like we do, you might pay more. […]